Section 125 “Cafeteria Clause Samples
The Section 125 "Cafeteria" clause establishes an employee benefit plan that allows participants to choose among two or more benefits consisting of both taxable and nontaxable options. Typically, employees can allocate a portion of their salary on a pre-tax basis to pay for eligible expenses such as health insurance premiums, dependent care, or medical expenses. This clause enables employees to tailor their benefits to their individual needs while reducing their taxable income, thereby providing tax savings and greater flexibility in benefits selection.
Section 125 “Cafeteria. Plan
1. The Board shall establish, a “Cafeteria Plan” that is designed to (a) allow employees who must make employee contributions for health care coverage to elect to do so on a pre-tax basis, (b) allow employees to elect to receive additional cash in lieu of Board paid health care coverage (as agreed to by the Board and the Association), and (c) allow employees to elect to participate in the dependent care and medical care flexible spending accounts (“FSAs”) described in paragraphs 3 & 4 below. In accordance with the foregoing, the Payment in Lieu of Insurance Coverage (Section 24.8 below) provisions of this Agreement shall be made through the Cafeteria Plan.
2. The Cafeteria Plan will be designed to meet the requirements of Internal Revenue Code (“IRC”) Section 125 and applicable regulations. Accordingly, each employee will have an opportunity on an annual basis to enroll in the Cafeteria Plan. The election to participate must be submitted at least ten (10) business days before the beginning of the plan year (October 1st through September 30th). Each employee hired after September 15th may enroll in the Section 125 Plan within his/her first sixty (60) days of employment and during his/her first year of employment only, the Section 125 Plan year will begin the first of the month following the employee's first sixty (60) days of employment and will end on the following September 30th. The Section 125 Plan may not be revoked during the current plan year unless there is a change in the employee’s circumstances that, in accordance with IRC Section 125, permits the employee to change his/her election under the plan (e.g., divorce, death of spouse, change in employment status including employment status affecting a spouse or dependent, birth or adoption of a child, a child losing eligibility for coverage, a court order requiring coverage, or other enrollment rights consistent with federal law. If revoked, any account balance will be governed by paragraph 5 below (Forfeiture of Unused Allocations). Details of the Cafeteria Plan will be provided on an annual basis at the time of enrollment and will also be available through the Board Treasurer’s office.
Section 125 “Cafeteria. Plan Employees may participate in the District’s IRS Section 125 Cafeteria Plan